HOUSING AUTHORITY OF CITY OF PONCHATOULA, LOUISIANA

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1 HOUSING AUTHORITY OF CITY OF PONCHATOULA, LOUISIANA Financial Statements and Supplemental Financial Information June 30, 2017

2 HOUSING AUTHORITY OF THE CITY OF PONCHATOULA PONCHATOULA, LOUISIANA ^^ouislcma/ L6O6N0 PliCM of 100,000«r nwrt InntbUnti 0 pwe«fi «rumti icoiooo innibitvu ^ C«nm W «r BMBA'twItn ftwtrtfmnwmh InhtblMntf ^ P)ic*iofHOOOle intipbltwrtlmimwsai (PonchatouCa 9fousing ^utrority Under the United States Housing Act of 1937, as amended, the U.S. Department of Housing and Urban Development (HUD) has direct responsibihty for administering low income housing programs in the United States. Accordingly, HUD has conhracted with the entity to administer certain HUD hinds. The entity is a public corporation, legally separate, fiscally independent and govemed by Board of Commissioners.

3 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Table of Contents June 30, 2017 Page No. Independent Auditor's Report 1-3 Management's Discussion and Analysis 4-8 Basic Financial Statements Statement of Net Position 10 Statement of Revenues, Expenses, and Changes in Net Position 11 Statement of Cash Flows 12 Statement of Cash Flows Reconciliation 13 Notes to the Basic Financial Statements Other Supplemental Statements and Schedules Schedule of Compensation Benefits and Other Payments to Agency Head or Chief Executive Officer 25 Schedule of Compensation Paid to Board Members 26 Statement and Certification of Actual Modernization Cost 27 Other Reports Independent Auditor's Report on Compliance and Internal Control Over Financial Reporting Based on an Audit of the Basic Financial Statements Performed in Accordance with Government Auditing Standards Schedule of Findings and Questioned Cost Management Letter Comments 33 Management's Corrective Action for Current Year Audit Findings 34 Summary of Prior Year Findings 35 Louisiana Statewide Agreed Upon Procedures Financial Data Schedule 48

4 John R. Vercher C.P.A. THE VRRCHRR GROTIP MEMBERS A Professional Corporation of ^ e '' r J Amencan Institute ot Certified Public Accountants Certified Public Accountants Jonathan M. Vercher, ^ M.S.. C.P.A., P.O. Box 1608 Jonathanvercher@cenmrytel.net ^nd _ ^uite A Society of Louisiana Jena, Louisiana Certified Public Accountants David R. Vercher M.B.A, C.P.A, C.E.E. Tel: (318) Association of davidvercher@cenmrytel.net Fax: (318) Certified Eraud Examiners INDEPENDENT AUDITOR'S REPORT Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of the Housing Authority of the City of Ponchatoula, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Housing Authority's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1

5 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the Housing Authority of the City of Ponchatoula, as of June 30, 2017, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Housing Authority of City of Ponchatoula's basic financial statements. The accompanying Financial Data Schedule, required by HUD, and supplementary schedules and statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Financial Data Schedule and supplementary schedules and statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Financial Data Schedule and supplementary schedules and statements are fairly stated in all material respects in relation to the basic financial statements as a whole.

6 other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 30, 2017, on our consideration of the Housing Authority of the City of Ponchatoula's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Housing Authority of the City of Ponchatoula's internal control over financial reporting and compliance. The Vercher Qroup October 30, 2017 Jena, Louisiana

7 Housing Authority of the City of Ponchatoula Management's Discussion and Analysis June 30, 2017 As management of the Ponchatoula Housing Authority, we offer readers of the authority's financial statements this narrative overview and analysis of the financial activities to consider the information presented here in conjunction with the authority's financial statements. FINANCIAL HIGHLIGHTS The assets of the authority exceeded its liabilities at the close of the most recent fiscal year by $2,011,951 (net position), which is a $35,607 increase from last year. As of the close of the current fiscal year, the authority's ending unrestricted net position was $493,290, which is a $91,132 increase from last year. The authority's cash and investment balance at June 30, 2017, was $544,007. The Authority had total operating revenues of $849,363, and total non-operating revenues of $38,673. The authority had total operating expenses of $941,843 and no non-operating expenses. The authority had capital contributions in the amount of $89,414 for the year. The authority had a total change in net position of $35,607 for the year. OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction of the authority's basic financial statements. The authority's basic financial statements consist of the Statement of Net Position, Statement of Revenues, Expenses and Changes in Net Position, Statement of Cash Flows, and the Notes to the Financial Statements. This report also contains the schedule of expenditures of federal awards as supplemental information in addition to the basic financial statements themselves. The authority has only one fund type, namely a proprietary fund. The Statement of Net Position included all of the authority's assets and liabilities. This fund type is used for activities which are financial and operated in a manner similar to those in the private sector. The authority has two main funding sources in its financial operation. These are the Low Rent Public Housing and Capital Fund Programs. Following is a brief description of each. Low Rent Public Housing - Under the Conventional Public Housing Program, the housing authority rents units it owns to low-income families. The Conventional Public Housing Program is operated under an Annual Contribution Contract (ACC) with HUD, and HUD provides an Operating Subsidy to enable the authority to provide housing at a rent that is based upon 30% of adjusted gross household income.

8 Housing Authority of the City of Ponchatoula Management's Discussion and Analysis - Continued June 30, 2017 Capital Fund Program - The Conventional Public Housing Program also includes the Capital Fund Program, the primary funding source for the authority's physical and management improvements. The formula funding methodology is based on size and age of the authority's units. The authority's overall financial position and operations for the year is summarized below based on the information in the current and prior year financial statements. The table below lists the Comparative Statement of Net Position as of June 30, Section 8 Housing Assistance - Housing Choice Voucher Program These programs assist lowincome families in affording decent, safe, and sanitary housing by encouraging property owners to construct new, or rehabilitate existing substandard housing, and then lease the units with rental subsidies to low-income families. Statement of Net Position Assets FYE 2016 FYE 2017 % Change Current Assets & Other Assets $ 492,703 $ 607, Capital Assets, Net 1,573,434 1,516, Total Assets 2,066,137 2,124, Liabilities Current Liabilities 88, , Non-Current Liabilities 1,522 2, Total Liabilities 89, , Net Position Net Investment in Capital Assets 1,573,434 1,516, Restricted 752 1, Unrestricted 402, , Total Net Position $ 1,976,344 $ 2,011, Total assets increased by $58,136 or 2.8% from last year. The primary reason for this increase is due to an increase in cash md cash equivalents in the amount of $91,871. Total liabilities increased by $22,529 or 25.1%. The primary reason for this change is due to an increase in other current liabilities, which increased by $27,899. Total net position increased by $35,607, or 1.8%.

9 Housing Authority of the City of Pouchatoula Mauagemeut's Discussion and Analysis - Continued June 30, 2017 The table below lists the Comparative Statement of Revenues, Expenses, and Changes in Net Position as of June 30, Statement of Revenues, Expenses, & Changes in Net Position EYE EYE % Change Operating Revenues Tenant Revenue $ 273,865 $ 294, HUD Operating Grants 439, , Total Operating Revenues 713, ,363 I9.I Operating Expenses Administration 222, , Tenant Services 1,849 3,729 I0I.7 Utilities 46,981 47, Operation & Maintenance 230, , Protection Services 13,200 12, Taxes & Insurance 63,274 64, Other 5,835 20, Housing Assistance Payments 140, , Depreciation 182, , Total Operating Expenses 906, , Operating Income (Loss) (193,736) (92,480) Non-Operating Revenues (Expenses) Interest 1,486 2, Other Revenue 66,161 35, Extra-Ordinary Maintenance Total Non-Operating Revenues (Expenses) 67,647 38, Capital Contributions 108,026 89, Changes in Net Position (18,063) 35, Beginning Net Position 1,994,407 1,976, Ending Net Position $ 1,976,344 $ 2,011, Total operating revenues inereased by $136,170 or 19.1%. The primary reason for this inerease is beeause of an inerease in HUD operating grants in the amount of $115,795. Total operating expenses inereased by $34,914 or 3.8%. The primary reason for this inerease is beeause of an inerease in housing assistanee payments in the amount of $56,735. Total non-operating revenues/expenses deereased by $28,974 or 42.8%. The primary reason for this ehange is beeause of a deerease in other revenue in the amount of $30,366. Capital eontributions deereased by $18,612 or 17.2%.

10 Housing Authority of the City of Ponchatoula Management's Discussion and Analysis - Continued June 30, 2017 Capital Asset & Debt Administration Capital Assets As of June 30, 2017, the authority's investment in capital assets was $1,516,678 (net of accumulated depreciation). This investment includes land, building improvements, dwelling equipment and maintenance equipment. Capital Assets * Less Accumulated Depreciation Capital Assets, Net ,895,239 $ 7,936,549 (6,321,805) (6,419,871) 1,573,434 $ 1,516,678 * Land in the amount of $ 110,941 is not being depreciated. Long Term Debt The Authority does not have any long-term liabilities at this time. Voluntary Transfer of Housing Choice Voucher Program Units from the Ponchatoula Housing Authority tla0751 to the Tangipahoa Parish Government Housing Program (LA2071 On June 5, 2017, the Office of Housing Voucher Programs approved the transfer and assigned July 1, 2017 as the effective date of transfer. This transfer does not include any Special Purpose Vouchers or Programs. The divesting PHA will work with the receiving PHA and Loretta Parker of the Financial Management Center (FMC) to transfer the Unrestricted Net Position (UNP) and Restricted Net Position (RNP) funds, respectively. A repayment agreement must be established immediately should HCV funds be unaccounted for during the reconciliation of UNP and RNP balances. The divesting PHA will procure a close-out financial review, per requirements in PIH Notice , to include the submission of all required financial information needed to close-out its HCV program for FY 2017 in the PIH sub-systems. The close-out reporting requirements include timely and complete reporting in the Voucher Management System (VMS) for all months in operations prior to the effected date of the voluntary transfer. Future events that will impact the Authority The authority relies heavily upon HUD operating subsidies. The amount appropriated has not currently been approved for the FYE Therefore, any results of budget shortfalls cannot be determined.

11 Housing Authority of the City of Ponchatoula Management's Discussion and Analysis - Continued June 30, 2017 Contacting the Authority's Finance Management The financial report is designed to provide a general overview of the authority's finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the following address: Housing Authority of the City of Ponchatoula PO Box 783 Ponchatoula. LA 70454

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13 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Statement of Net Position June 30, 2017 ASSETS CURRENT ASSETS Cash & Cash Equivalents Investments Accounts Receivable, Net Inventory, Net Prepaid Items RESTRICTED ASSETS Tenants' Security Deposits Other Restricted Cash TOTAL CURRENT ASSETS NON-CURRENT ASSETS Capital Assets (Net of Accumulated Depreciation) TOTAL NON-CURRENT ASSETS TOTAL ASSETS ENTERPRISE FUND 233, ,307 29,816 8,566 25,206 20,740 11, ,595 1,516,678 1,516,678" 2,124,273 LIABILITIES CURRENT LIABILITIES Accounts Payable Accrued Wages/Payroll Taxes Payable Accrued Pilot Accrued Compensated Absences Unearned Revenue Tenants' Security Deposits Other Current Liabilities Accrued Liabilities - Other TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Accrued Compensated Absences TOTAL NON-CURRENT LIABILITIES 11,682 4,323 24,253 5,287 5,179 20,740 27,899 9, ,355 2,967 2,967 TOTAL LIABILITIES 112,322 NET POSITION Net Investment in Capital Assets Restricted Unrestricted TOTAL NET POSITION 1,516,678 1, ,290 2,011,951 The accompanying notes are an integral part of this statement. 10

14 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Statement of Revenues, Expenses, & Changes in Net Position Year Ended June 30, 2017 OPERATING REVENUES Tenant Rental Revenue HUD PHA Operating Grant TOTAL OPERATING REVENUES OPERATING EXPENSES Administration: Administrative Salaries EBC Administrative Other Operating - Administrative Tenant Services: Tenant Services - Other Cost of Sales & Service: Water Electricity Gas Sewer Ordinary Maintenance Labor Materials Contract Cost EBC Maintenance Protection Services Insurance Payment in Lieu of Taxes Bad Debt -Tenant Rent Compensated Absences Housing Assistance Payments Other General Depreciation TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NON-OPERATING REVENUES (EXPENSES) Interest Earnings Other Revenue TOTAL NON-OPERATING REVENUES (EXPENSES) Capital Contributions CHANGE IN NET POSITION TOTAL NET POSITION - BEGINNING TOTAL NET POSITION - ENDING ENTERPRISE FUND 294,240 55_5J23_ ,632 27, ,089 3,729 10,410 8, ,380 59,351 26,079 76,886 28,193 12,150 39,786 24, , ,092 13, (92,480) 2, ]_,97_6^344 ' The accompanying notes are an integral part of this statement. 11

15 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Statement of Cash Flows Year Ended June 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Receipts From Customers & Users Receipts From HUD Payments to Suppliers Payments to Employees Payments for PILOT NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM NON-CAPITAL ACTIVITIES Other Revenue NET CASH PROVIDED (USED) BY NON-CAPITAL ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants Acquisition & Construction of Capital Assets Deletion of Capital Assets NET CASH PROVIDED (USED) BY CAPITAL & RELATED FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Investments Interest & Dividends Received NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR RECONCILIATION TO BALANCE SHEET Cash and Cash Equivalents Tenants' Security Deposits Other Restricted Cash TOTAL CASH & CASH EQUIVALENTS ENTERPRISE FUND 269, ,861 (581,061) (117,617) (22,020) 95,964 35,795 35,795 89,414 (191,071) 60,253 (41>04) 6,354 _ 2,878_ "9,232" 99, ,113 "265,700" 233,642 20,740 _11,318_ "265",7"o"o" The accompanying notes are an integral part of this statement. 12

16 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Statement of Cash Flows Reconciliation For The Year Ended June 30,2017 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) $ (92,480) Depreciation Expense 187,574 (Increase) Decrease in Accounts Receivable (8,760) (Increase) Decrease in Accounts Receivable, HUD (8,262) (Increase) Decrease in Inventories (2,402) (Increase) Decrease in Prepaid Items (2,235) Increase (Decrease) in Accounts Payable 231 Increase (Decrease) in Accounts Payable-HUD 851 Increase (Decrease) in Compensated Absences 3,435 Increase (Decrease) in Accrued Wage/Payroll Taxes Payable (3,069) Increase (Decrease) in Tenant Deposits (2,850) Increase (Decrease) in Unearned Revenue (12,829) Increase (Decrease) in Accrued PILOT 2,233 Increase (Decrease) in Accrued Liabilities - Other 6,628 Increase (Decrease) in Other Current Liabilities 27,899 TOTAL ADJUSTMENTS 188,444 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 95,964 LISTING OF NONCASH INVESTING, CAPITAL, & FINANCIAL ACTIVITIES Contributions of Capital Assets From Government $ -0- The accompanying notes are an integral part of this statement. 13

17 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30,2017 INTRODUCTION The Housing Authority of the City of Ponchatoula (the authority) was chartered as a public corporation under the laws of the State of Louisiana for the purpose of providing safe and sanitary dwelling accommodations for the residents of the City of Ponchatoula, Louisiana. This formation was contingent upon the approval of the city. The authority is governed by a Board of Commissioners (Board), which is composed of five members appointed by the city and serve five-year staggered terms. The Board of the authority exercises all powers granted to the authority. GASB Statement No. 14 established criteria for determining the governmental reporting entity. Under provisions of this statement, the authority is considered a primary government, since it is a special purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state and local governments. As used in GASB 14, fiscally independent means that the authority may, without the approval or consent of another governmental entity, determine or modify its own budget, control collection and disbursements of funds, maintain responsibility for funding deficits and operating deficiencies, and issue bonded debt. GASB Statements No. 14 and No. 39 establish criteria for determining which, if any, component units should be considered part of the authority for financial reporting purposes. The basic criterion for including a potential component unit within the reporting entity is financial accountability, which includes: 1. Appointing a majority of an organizations governing body, and: a. The ability of the government to impose its will on that organization and/or b. The potential for the organization to provide specific financial benefits to or impose specific financial burdens on the government. 2. Organizations for which the government does not appoint a voting majority but are fiscally dependent on the government. 3. Organizations for which the reporting entity financial statements would be misleading if data of the organization is not included because of the nature or significance of the relationship. Based on the previous criteria, the authority has determined that the following component unit should be considered as part of the authority reporting entity: PHA-Helena Manor, Inc. (CU) is a legally separate entity. The members of the authority's board of commissioners also serve as the board of directors of the entity. The authority has the ability to impose its will on the entity. 14

18 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS (CONTINUED) JUNE 30,2017 The CU was formed for the purpose of facilitating the development and financing of a 30 unit elderly housing facility within the city limits of the City of Ponchatoula. The CU is a partner in the developer partnership. Since the investment limited partner owns 99+% interest in the partnership, the CU takes the position that eventual control of the partnership rests with the investment limited partnership. The partnership has entered into loan agreements and other financing arrangements that may have incurred contingent liabilities on behalf of the CU, but not any that would obligate the PHA. No contingencies have been reported in the PHA financial statements. This CU is included through blended presentation in the PHA financial statements. The authority is a related organization of the City of Ponchatoula, Louisiana since the city appoints a voting majority of the authority's governing board. The city is not financially accountable for the authority as it cannot impose its well on the authority and there is no potential for the authority to provide financial benefit to, or impose financial burdens on, the city. Accordingly, the authority is not a component unit of the financial reporting entity of the city. BASIS OF PRESENTATION As required by Louisiana State Reporting Law (LSA-R.S. 24:514) and HUD regulations, financial statements are presented in accordance with accounting principles generally accepted in the United States of America. The accounts of the PHA are accounted for under the proprietary fund. Accordingly, the accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applied to governmental units. Proprietary Eund Type - Proprietary fund is accounted for on the flow of economic resources measurements focus and uses the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The PHA applies all applicable FASB pronouncements in accounting and reporting for its proprietary operations. The PHA's funds include the following type: Enterprise Eund - Enterprise fund is used to account for those operations that are financed and operated in a manner similar to private business or where the board has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability. 15

19 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30, SUMMARY OF ORGANIZATION & SIGNIFICANT ACCOUNTING POLICIES A. BASIC FINANCIAL STATEMENTS The basic financial statements (i.e., the Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Net Position) report information on all of the activities of the authority. B. MEASUREMENT FOCUS, BASIS OE ACCOUNTING, & FINANCIAL STATEMENT PRESENTATION The basic financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule, the effect of Interfund activity has been eliminated from the basic financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government's enterprise operations. Elimination of these charges would distort the direct cost and program revenues reported for the various functions concerned. Operating revenues and expenses have been reported separately from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an enterprise fund's principal ongoing operations. The primary operating revenue of the housing authority is derived from tenant revenue. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Housing Authority's policy to use restricted resources first, then unrestricted resources as they are needed. C. EQUITY CLASSIEICATIONS In the government-wide financial statements, equity is classified as Net Position and displayed in three components as applicable. The components are as follows: Net Investment in Capital Assets - Capital assets including restricted capital assets, when applicable, net of accumulated depreciation. Restricted Net Position - Net position with constraints placed on their use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or (2) law through constitutional provisions or enabling legislation. 16

20 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30,2017 Unrestricted Net Position - All other net position that does not meet the definition of "restricted" or "net investment in capital assets". When an expense is incurred for the purposes for which both restricted and unrestricted net position is available, management applies restricted resources first. The policy concerning which to apply first varies with the intended use and legal requirements. The decision is typically made by management at the incurrence of the expense. D. DEPOSITS & INVESTMENTS The Housing Authority's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. State law and the housing authority's investment policy allow the housing authority to invest in collateralized certificated of deposits, government backed securities, commercial paper, the state sponsored investment pool, and mutual funds consisting solely of government backed securities. Investments (bank certificate of deposits in excess of 90 days) for the housing authority are reported at fair value. E. RECEIVABLES & PAYABLES Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year referred to as either "due to/from other funds" (i.e., the current portion of Interfund loans) or "advances to/from other funds" (i.e., the non-current portion of Interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Advances between funds, as reported in the accompanying basic financial statements, are offset by a restriction on net position. All trade and other receivables are shown net of an allowance for uncollectibles. F. INVENTORIES & PREPAID ITEMS All inventories are valued at cost using the first-in/first out method. Inventories are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the basic financial statements. G. CAPITAL ASSETS Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable columns in the basic financial statements. Capital assets are capitalized at historical cost. The housing authority maintains a threshold level of $3,500 or more for capitalizing capital assets. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 17

21 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30,2017 Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The total interest expense included during the current fiscal year was $-0-. Of this amount, $-0- was included as part of the cost of capital assets under construction in connection with construction projects. All capital assets, other than land, are depreciated using the straight-line method over the following useful lives: Description Estimated Lives Land improvements 20 years Buildings 20 years Building improvements 10 years Furniture and fixtures 5 years Vehicles 5 years Equipment 5 years H. LONG-TERM OBLIGATIONS In the basic financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. I. EXTRAORDINARY & SPECIAL ITEMS Extraordinary items are transactions or events that are both unusual in nature and infrequent in occurrence. Special items are transactions or events within the control of the housing authority, which are either unusual in nature or infrequent in occurrence. J. ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenditures, and expenses during the reporting period. Actual results could differ from those estimates. 18

22 Housing Authority of the City of Pouchatoula Pouchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30, CASH & INVESTMENTS (CD'S IN EXCESS OF 90 DAYSl At June 30, 2017, the housing authority has cash and investments (bank balances) totaling $547,974 as follows; Demand deposits $ 279,416 Time deposits 268,558 Total $ 547,974" These deposits are stated at cost, which approximated market. Under state law, these deposits (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscal agent bank in a holding or custodial bank that is mutually acceptable to both parties. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the government will not be able to recover its deposits. Under state law, these deposits (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscal agent bank in a holding or custodial bank that is mutually acceptable to both parties. Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities within 10 days of being notified by the Entity that the fiscal agent bank has failed to pay deposit funds upon demand. Further, Louisiana Revised Statute 39:1224 states that securities held by a third party shall be deemed to be held in the Entity's name. Deposits It is the housing authority's policy for deposits to be 100% secured by collateral at market or par, whichever is lower, less the amount of the Federal Deposit Insurance Corporation insurance. The housing authority's deposits are categorized to give an indication of the level of risk assumed by the housing authority at year end. The categories are described as follows; Category 1 - Insured or collateralized with securities held by the housing authority or by its agent in the housing authority's name. Category 2 - Collateralized with securities held by the pledging financial institution's trust department or agent in the housing authority's name. Category 3 - Uncollateralized. 19

23 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30,2017 Amounts on deposit are secured by the following pledges: Deposits were fully secured as of June 30, Description Market Value FDIC (Category 1) $ 500,000 Securities (Category 2) 327,913 Total $ '827,"9i"3" 3. ACCOUNTS RECEIVABLE The receivables (net of allowmice for doubtful accounts of $79) were $29,816 as of June 30, The receivables are as follows: 4. PREPAID ITEMS A/RPHA Projects $ 1,425 A/RHUD 18,665 A/R Tenants 396 A/R Miscellaneous 8,299 Accrued Interest Receivable 1,110 Allowance For Doubtful Accounts (7^) Total $ 29,816 The housing authority's prepaid items as of June 30, 2017, consist of the following: 5. INVENTORY Prepaid Insurance $ 25,206 Total $ "25"206" The inventories of $8,566, as of June 30, 2017, are as follows: Inventories $ 9,017 Allowance for Obsolete Inventories (45 F) Inventories, Net $ 8,566 20

24 Housing Authority of the City of Pouchatoula Pouchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30, CAPITAL ASSETS Capital assets activity for the year ended June 30, 2017, was as follows; Beginning Ending Balance Additions Deletions Balance Land *! g 110,941 $ -0- $ -0- $ 110,941 Buildings & Leasehold Improvements 7,570, , ,761,173 Fumiture & Equipment, Etc. 153, (89,508) 64,435 Constmetion-ln-Progress* 60, (60,253) -0- Total 7,895, ,071 (149,761) 7,936, Less Accumulated Depreciation (6,321,805) (187,574) """^1^87iy Net Capital Assets! g 1,573,434 $ 3,497 $ (60,253) $ 1,516,678 * Land in the amount of $110,941 is not being depreciated. 7. ACCOUNTS. SALARIES & OTHER PAYABLES The payables of $45,545 at June 30, 2017, are as follows: Accounts Payable Accmed Wages/PajToll Taxes Payable Aeemed Compensated Absences (Current Portion) Aeemed Pilot Total 11,682 4,323 5,287 24,253 45, CHANGES IN COMPENSATED ABSENCES PAYABLES The following is a summary of changes in compensated absences payable at June 30, 2017: Current Noncurrent Total Begiiming of year $ 3,297 $ Additions/Retirements 1,990 End of year $ 5,287 $ 1,522 $ 1,445 2,967 $ 4,819 3,435 8,254 21

25 9. RETIREMENT SYSTEMS Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30,2017 The authority participates in the Housing Agency Retirement Trust plan, administered by Mercer, which is a defined contribution plan. The plan consists of employees of various local and regional housing authorities, urban renewal agencies, and other similar organizations. Through this plan, the authority provides pension benefits for all of its full-time employees. All regular and full-time employees are eligible to participate in the plan on the first day of the month after completing six months of continuous and uninterrupted employment. Plan provisions and changes to the plan contributions are determined by the Board of the authority. Under a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The employer is required to make monthly contributions equal to eight percent of each participant's basic (excludes overtime) compensation. Employees are required to contribute five percent of their annual covered salary. The authority's contribution for each employee and income allocated to the employee's account are fully vested after five years of continuous service. The authority's contributions and interest forfeited by employees who leave employment before five years of service are used to offset future contributions of the authority. Normal retirement date shall be the first day of the month following the employee's sixty-fifth birthday or after ten years of participation in the plan. The housing authority's total payroll for the fiscal year ending June 30, 2017, was $118,783. The housing authority's contributions were calculated using the base salary amount of $69,700. Contributions to the plan were S3,485 and S5,576 by the employees and the housing authority, respectively. 10. CONTINGENT LIABILITIES At June 30, 2017, the housing authority is subject to possible examinations made by federal regulators who determine compliance with terms, conditions, laws and regulations governing grants given to the housing authority in the current and prior years. These examinations may result in required refunds by the housing authority to federal grantors and/or program beneficiaries. 11. ECONOMIC DEPENDENCY Statement of Financial Accounting Standard (SEAS) No. 14 requires disclosure in financial statements of a situation where one entity provides more than 10% of the audited entity's revenues. The Department of Housing & Urban Development provided $644,537 to the housing authority, which represents approximately 65.9 % of the housing authority's revenues for the year. 22

26 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana NOTES TO THE BASIC FINANCIAL STATEMENTS - (CONTINUED) JUNE 30, VOLUNTARY TRANSFER OF HOUSING CHOICE VOUCHER PROGRAM UNITS FROM THE PONCHATOULA HOUSING AUTHORITY (LA075) TO THE TANGIPAHOA PARISH GOVERNMENT HOUSING PROGRAM (LA 207) On June 5, 2017, the Office of Housing Voucher Programs approved the transfer and assigned July 1, 2017 as the effective date of transfer. This transfer does not include any Special Purpose Vouchers or Programs. The divesting PHA will work with the receiving PHA and Loretta Parker of the Financial Management Center (FMC) to transfer the Unrestricted Net Position (UNP) and Restricted Net Position (RNP) funds, respectively. A repayment agreement must be established immediately should HCV funds be unaccounted for during the reconciliation of UNP and RNP balances. The divesting PHA will procure a close-out financial review, per requirements in PIH Notice , to include the submission of all required financial information needed to close-out its HCV program for FY 2017 in the PIH sub-systems. The close-out reporting requirements include timely and complete reporting in the Voucher Management System (VMS) for all months in operations prior to the effected date of the voluntary transfer. 23

27 other Supplemental Statements & Schedules 24

28 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Schedule of Compensation Benefits and Other Payments to Agency Head of Chief Executive Officer Year Ended June 30, 2017 Tammie Groover, Executive Director (Contract) Purpose Amount Salary $ -0- Benefits-Insurance -0- Benefits-Retirement -0- Benefits (Expense Allowance) -0- Car Allowance -0- V ehicle Provided by Government -0- Per Diem -0- Reimbursements -0- Travel -0- Registration Fees -0- Conference Travel -0- Continuing Professional Education Fees -0- Housing -0- Un-vouchered Expenses* -0- Special Meals $ -0- NOTE: The executive director serves under conttact with the Covington Housing Authority. Payments made for the executive director's services are made directly to Covington Housing Authority. *An example of an un-vouchered expense would be a travel advance. See independent accountant's report. 25

29 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Schedule of Compensation Paid to Board Members Year Ended June 30, 2017 Board Member Title Salary Charles "Buddy" Pugh Chairman -0- Owen "Sonny" Joiner Vice-Chairman -0- Patricia Ayala Commissioner -0- Ella Badon Commissioner -0- Eva Jacks Commissioner -0- See Independent Auditor's Report 26

30 Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana Statement and Certification of Actual Modernization Cost Annual Contribution Contract Complete Project CFP Not Complete Project CFP Total 1. The Actual Modernization Costs Are As Follows: Funds Approved 128,172 $ 133, ,492 Funds Expended (128,172) (133,320) i2^a92)_ Excess of Funds Approved Funds Advanced 128, , ,827 Funds Expended (128,172) (133,320) (261,492) Excess of Funds Advanced -0- $ (18,665) $ (18,665) See Independent Auditor's Report The accompanying notes are an integral part of this statement. 27

31 28

32 John R. Vercher C.P.A. THE VERCHER GROUP MEMBERS A Professional Corporation of American Institute of Certified Public Accountants Certified Public Accountants Jonathan M. Vercher, ^ M.S.. C.P.A., P.O. Box 1608 Jonathanvercher@cenmrytel.net ^nd _ ^uite A Society of Louisiana Jena, Louisiana Certified Public Accountants David R. Vercher M.B.A., C.P.A, C.E.E. Tel: (318) AssoHafion of Fax: (318) INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS Housing Authority of the City of Ponchatoula Ponchatoula, Louisiana We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business-type activities of the Housing Authority of the City of Ponchatoula, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Housing Authority of the City of Ponchatoula's basic financial statements, and have issued our report thereon dated October 30, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Housing Authority of the City of Ponchatoula's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Housing Authority of the City of Ponchatoula's internal control. Accordingly, we do not express an opinion on the effectiveness of the Housing Authority of the City of Ponchatoula's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weakness may exist that have not been identified. 29

33 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Housing Authority of the City of Ponchatoula's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying Schedule of Findings and Questioned Costs as items ( Payroll Tax Deposits). Housing Authority of the City of Ponchatoula's Response to Findings The Housing Authority of the City of Ponchatoula's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The Housing Authority of the City of Ponchatoula's response was no subjected to the auditing procedures applied in the audit of the financial statements and, according, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. This report is intended solely for the information and use of the audit committee, management, federal awarding agencies and Legislative Auditor's Office and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a public document and its distribution is not limited. The Vercher Qroup October 30, 2017 Jena, Louisiana 30

34 HOUSING AUTHORITY OF THE CITY OF PONCHATOULA PONCHATOULA, LOUISIANA SCHEDULE OF FINDINGS AND QUESTIONED COST For the Year Ended June 30, 2017 We have audited the basic financial statements which collectively comprise the Housing Authority of the City of Ponchatoula, Louisiana, as of and for the year ended June 30, 2017, and have issued our report thereon dated October 30, We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Section I Sununary of Auditor's Results Our audit of the basic financial statements as of June 30, 2017, resulted in an unmodified opinion, a. Report on Internal Control and Compliance Material to the Basic Financial Statements Internal Control Material Weaknesses Yes 13 No Significant Deficiencies 3 Yes 3 No Compliance Compliance Material to Basic Financial Statements 3 Yes 3 No b. Federal Awards (Not AppUcable) Internal Control Material Weaknesses Yes No Other Conditions Yes No Type of Opinion On Compliance For Major Programs Unmodified Disclaimer Qualified Adverse Are the findings required to be reported in accordance with Uniform Guidance? Yes No c. Identification Of Major Programs: CFDA Number (s) Name Of Federal Program (or Cluster) Dollar threshold used to distinguish between Type A and Type B Programs: Is the auditee a Tow-risk' auditee, as defined by OMB Uniform Guidance? S Yes No 31

35 HOUSING AUTHORITY OF THE CITY OF PONCHATOULA PONCHATOULA, LOUISIANA SCHEDULE OF FINDINGS AND QUESTIONED COST For the Year Ended June 30, 2017 Section H Financial Statement Findings Payroll Tax Deposits Condition: The Housing Authority is paying its payroll taxes quarterly with forms 941. Criteria: The Housing Authority pays more than $2,500 per quarter in payroll taxes, thus is a monthly payroll tax depositor. Cause of Condition: Not making monthly payroll tax deposits. Effect of Condition: IRS penalties. Recommendation: The Housing Authority should make payroll tax payment deposits monthly. Client Response: The Housing Authority will begin making payroll tax payment deposits monthly. Section HI Federal Awards Findings and Questioned Costs Not applicable. 32

36 John R. Vercher C.P.A. Jonathan M. Vercher M.S., C.P.A. net David R. Vercher M.B.A.. C.P.A. C.F.E. THE VERCHER GROTIP A Professional Corporation of Certified Public Accountants P.O. Box N St. - Suite A Jena, Louisiana Tel: (318) Fax: (318) MEMBERS American Institute of Certified Public Accountants Society of Louisiana Certified Public Accountants Association of Certified Eraud Examiners MANAGEMENT LETTER COMMENTS During the course of our audit, we observed conditions and circumstances that may be improved. Below are findings noted for improvement, our recommendation for improvement and the Housing Authority's plan for corrective action. CURRENT YEAR MANAGEMENT LETTER COMMENTS No items to report. 33

37 HOUSING AUTHORITY OF THE CITY OF PONTCHATOULA PONTCHATOULA, LOUISIANA MANAGEMENT'S CORRECTIVE ACTION FOR CURRENT YEAR AUDIT FINDINGS FINDINGS; Payroll Tax Deposits Finding: The Housing Authority is paying its payroll taxes quarterly with forms 941. Corrective Action: The Housing Authority will begin making payroll tax payment deposits monthly. Contact Person: Tammie Groover, Interim Executive Director Anticipated Completion Date: June 30,

38 HOUSING AUTHORITY OF THE CITY OF PONCHATOULA PONCHATOULA, LOUISIANA MANAGEMENT'S SUMMARY OF PRIOR YEAR FINDINGS Legislative Auditor State of Louisiana Baton Rouge, Louisiana The management of the Housing Authority of the City of Ponchatoula, Louisiana has provided the following action summaries relating to audit findings brought to their attention as a result of their financial audit for the year ended June 30, Old Outstanding Checks (Resolved) Condition: The housing authority has $7,205 in outstanding checks that are more than six months old. Criteria: Not clearing old outstanding checks on a regular basis can result in the issuance of financial statements that understates cash. Cause of Condition: Not correcting the bank reconciliation. Effect of Condition: Understatement of cash in the financial statements. Recommendation: The old outstanding checks should be added back to the books and the bank reconciliation should be corrected. Client Response: The housing authority's fee accountant has corrected the outstanding checks as of July

39 John R. Vercher C.P.A. net Jonathan M. Vercher M.S.. C.P.A. David R. Vercher M.B.A., C.P.A., C.F.E. net THE VERCHER GROTIP A Professional Corporation of Certified Public Accountants P.O. Box N St. - Suite A Jena, Louisiana Tel: (318) Fax: (318) MEMBERS American Institute of Certified Public Accountants Society of Louisiana Certified Public Accountants Association of Certified Eraud Examiners AGREED-UPON PROCEDURES REPORT Housing Authority of the City of Ponchatoula, Louisiana Independent Accountant's Report On Applying Agreed-Upon Procedures For the Period of July 1,2016- June 30,2017 Ponchatoula Housing Authority Ponchatoula, Louisiana To the Ponchatoula Housing Authority and the Louisiana Legislative Auditor: We have performed the procedures enumerated below, which were agreed to by Ponchatoula Housing Authority (entity) and the Louisiana Legislative Auditor (LLA) on the control and compliance (C/C) areas identified in the LLA's Statewide Agreed-Upon Procedures (SAUPs) for the fiscal period July 1, 2016 through June 30, The Entity's management is responsible for those C/C areas identified in the SAUPs. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and applicable standards of Government Auditing Standards. The sufficiency of these procedures is solely the responsibility of the specified users of this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures and associated findings are as follows: 36

40 Written Policies and Procedures 1. Obtain the entity's written policies and procedures and report whether those written policies and procedures address each of the following financial/business functions (or report that the entity does not have any written policies and procedures), as applicable: a) Budgeting, including preparing, adopting, monitoring, and amending the budget b) Purchasing, including (1) how purchases are initiated; (2) how vendors are added to the vendor list; (3) the preparation and approval process of purchase requisitions and purchase orders; (4) controls to ensure compliance with the public bid law; and (5) documentation required to be maintained for all bids and price quotes. c) Disbursements, including processing, reviewing, and approving d) Receipts, including receiving, recording, and preparing deposits e) Payroll/Personnel, including (1) payroll processing, and (2) reviewing and approving time and attendance records, including leave and overtime worked. f) Contracting, including (1) types of services requiring written contracts, (2) standard terms and conditions, (3) legal review, (4) approval process, and (5) monitoring process g) Credit Cards (and debit cards, fuel cards, P-Cards, if applicable), including (1) how cards are to be controlled, (2) allowable business uses, (3) documentation requirements, (4) required approvers, and (5) monitoring card usage h) Travel and expense reimbursement, including (1) allowable expenses, (2) dollar thresholds by category of expense, (3) documentation requirements, and (4) required approvers i) Ethics, including (1) the prohibitions as defined in Louisiana Revised Statute 42: , (2) actions to be taken if an ethics violation takes place, (3) system to monitor possible ethics violations, and (4) requirement that all employees, including elected officials, annually attest through signature verification that they have read the entity's ethics policy. Note: Ethics requirements are not applicable to nonprofits. j) Debt Service, including (1) debt issuance approval, (2) EMMA reporting requirements, (3) debt reserve requirements, and (4) debt service requirements. Observation: We obtained a copy of the written policies and procedures manual and read it for the above items. Exception: The poucy and procedures manual did not address debt service. Management's Response: The Entity does not have debt and is not allowed to enter into any debt. Board (or Finance Committee, if applicable) 2. Obtain and review the board/committee minutes for the fiscal period, and: a) Report whether the managing board met (with a quorum) at least monthly, or on a frequency in accordance with the board's enabling legislation, charter, or other equivalent document. 37

41 b) Report whether the minutes referenced or included monthly budget-to-actual comparisons on the General Fund and any additional funds identified as major funds in the entity's prior audit (GAAP-basis). > If the budget-to-actual comparisons show that management was deficit spending during the fiscal period, report whether there is a formal/written plan to eliminate the deficit spending for those entities with a fund balance deficit. If there is a formal/written plan, report whether the meeting minutes for at least one board meeting during the fiscal period reflect that the board is monitoring the plan. c) Report whether the minutes referenced or included non-budgetary financial information (e.g. approval of contracts and disbursements) for at least one meeting during the fiscal period. Observation: We read the minutes of the board meetings and found the board meets when it can get a quorum, financial statements are presented and the board approves disbursements. Bank Reconciliations 3. Obtain a listing of client bank accounts from management and management's representation that the listing is complete. We obtained a Usting and management's representation that the Ust is complete. 4. Using the listing provided by management, select all of the entity's bank accounts (if five accounts or less) or one-third of the bank accounts on a three year rotating basis (if more than 5 accounts). If there is a change in practitioners, the new practitioner is not bound to follow the rotation established by the previous practitioner. Note: School student activity fund accounts may he excluded from selection if they are otherwise addressed in a separate audit or AUP engagement. For each of the bank accounts selected, obtain bank statements and reconciliations for all months in the fiscal period and report whether: a) Bank reconciliations have been prepared; b) Bank reconciliations include evidence that a member of management or a board member (with no involvement in the transactions associated with the bank account) has reviewed each bank reconciliation; and c) If applicable, management has documentation reflecting that it has researched reconciling items that have been outstanding for more than 6 months as of the end of the fiscal period. Observation: We obtained a listing of bank accounts on bank confirmations and management signed the confirmations to represent the Ustings were complete. A) Bank reconciliations are prepared for all bank accounts that have activity. B) The minutes of the meetings show bank reconciliations are prepared by the fee accountant and are reviewed by the board. C) Inquiry found the fee accountant reviews old outstanding checks on a regular basis. 38

42 Collections 5. Obtain a listing of cash/check/money order (cash) collection locations and management's representation that the listing is complete. Observation: We obtained the listing and management's representation that the Usting is complete. 6. Using the listing provided by management, select all of the entity's cash collection locations (if five locations or less) or one-third of the collection locations on a three year rotating basis (if more than 5 locations). If there is a change in practitioners, the new practitioner is not bound to follow the rotation established by the previous practitioner. Note: School student activity funds may be excluded from selection if they are otherwise addressed in a separate audit or AUP engagement. For each cash collection location selected: a) Obtain existing written documentation (e.g. insurance policy, policy manual, job description) and report whether each person responsible for collecting cash is (1) bonded, (2) not responsible for depositing the cash in the bank, recording the related transaction, or reconciling the related bank account (report if there are compensating controls performed by an outside party), and (3) not required to share the same cash register or drawer with another employee. b) Obtain existing written documentation (e.g. sequentially numbered receipts, system report, reconciliation worksheets, policy manual) and report whether the entity has a formal process to reconcile cash collections to the general ledger and/or subsidiary ledgers, by revenue source and/or agency fund additions, by a person who is not responsible for cash collections in the cash collection location selected. c) Select the highest (dollar) week of cash collections from the general ledger or other accounting records during the fiscal period and: > Using entity collection documentation, deposit slips, and bank statements, trace daily collections to the deposit date on the corresponding bank statement and report whether the deposits were made within one day of collection. If deposits were not made within one day of collection, report the number of days from receipt to deposit for each day at each collection location. > Using sequentially numbered receipts, system reports, or other related collection documentation, verify that daily cash collections are completely supported by documentation and report any exceptions. Observation: A) The Entity does not accept cash. B) The Entity does not accept cash. C) The Entity does not accept cash. 7. Obtain existing written documentation (e.g. policy manual, written procedure) and report whether the entity has a process specifically defined (identified as such by the entity) to determine completeness of all collections, including electronic transfers, for each revenue source and agency fund additions (e.g. periodic confirmation with outside parties, reconciliation to utility billing after cutoff procedures, reconciliation of traffic ticket number sequences, agency fund forfeiture monies confirmation) by a person who is not responsible for collections. 39

43 Observation: The Entity has a poucy and procedure manual that addresses collection procedures but does not require that the employee responsible for collections not be the same employee responsible for determining completeness. The Entity does not accept cash. Disbursements - General (excluding credit card/debit card/fuel card/p-card purchases or payments) 8. Obtain a listing of entity disbursements from management or, alternately, obtain the general ledger and sort/filter for entity disbursements. Obtain management's representation that the listing or general ledger population is complete. Observation: We obtained a general ledger from the Entity and management's representation that the general ledger population is complete. 9. Using the disbursement population from #8 above, randomly select 25 disbursements (or randomly select disbursements constituting at least one-third of the dollar disbursement population if the entity had less than 25 transactions during the fiscal period), excluding credit card/debit card/fuel card/p-card purchases or payments. Obtain supporting documentation (e.g. purchase requisitions, system screens/logs) for each transaction and report whether the supporting documentation for each transaction demonstrated that: a) Purchases were initiated using a requisition/purchase order system or an equivalent electronic system that separates initiation from approval functions in the same manner as a requisition/purchase order system. b) Purchase orders, or an electronic equivalent, were approved by a person who did not initiate the purchase. c) Payments for purchases were not processed without (1) an approved requisition and/or purchase order, or electronic equivalent; a receiving report showing receipt of goods purchased, or electronic equivalent; and an approved invoice. Observation: We randomly selected 25 disbursements and obtained supporting documentation of the following: A) Purchases were initiated using a requisition order system. B) Purchases are approved by a person not initiating the purchase, the board. C) Purchases are not processed without an approved invoice. 10. Using entity documentation (e.g. electronic system control documentation, policy manual, written procedure), report whether the person responsible for processing payments is prohibited from adding vendors to the entity's purchasing/disbursement system. Observation: Inquiry found that the person responsible for processing payments is not prohibited from adding vendors to the Entity's purchasing/disbursement system. Exception: The person responsible for processing payments is not prohibited from adding vendors to the entity purchasing/disbursement system. Management's Response: Management does not have enough personnel to implement this procedure. There have been no new vendors added this fiscal year. 40

44 11. Using entity documentation (e.g. electronic system control documentation, policy manual, written procedure), report whether the persons with signatory authority or who make the final authorization for disbursements have no responsibility for initiating or recording purchases. Observation: A board member has the final authorization for disbursements and has no responsibiuty for initiating or recording purchases. 12. Inquire of management and observe whether the supply of unused checks is maintained in a locked location, with access restricted to those persons that do not have signatory authority, and report any exceptions. Alternately, if the checks are electronically printed on blank check stock, review entity documentation (electronic system control documentation) and report whether the persons with signatory authority have system access to print checks. Observation: Inquiry and observation found that unused checks are locked in the Entity's file cabinet. 13. If a signature stamp or signature machine is used, inquire of the signer whether his or her signature is maintained under his or her control or is used only with the knowledge and consent of the signer. Inquire of the signer whether signed checks are likewise maintained under the control of the signer or authorized user until mailed. Report any exceptions. Observation: Not appucable. Credit Cards/Debit Cards/Fuel Cards/P-Cards 14. Obtain from management a listing of all active credit cards, bank debit cards, fuel cards, and P- cards (cards), including the card numbers and the names of the persons who maintained possession of the cards. Obtain management's representation that the listing is complete. Observation: Management provided a Usting of all credit cards and management's representation that the Ust is complete. 15. Using the listing prepared by management, randomly select 10 cards (or at least one-third of the cards if the entity has less than 10 cards) that were used during the fiscal period, rotating cards each year. If there is a change in practitioners, the new practitioner is not bound to follow the rotation established by the previous practitioner. Observation: The entity has (1) one Visa card. Obtain the monthly statements, or combined statements if multiple cards are on one statement, for the selected cards. Select the monthly statement or combined statement with the largest dollar activity for each card (for a debit card, select the monthly bank statement with the largest dollar amount of debit card purchases) and: a) Report whether there is evidence that the monthly statement or combined statement and supporting documentation was reviewed and approved, in writing, by someone other than the authorized card holder. [Note: Requiring such approval may constrain the legal authority of certain public officials (e.g., mayor of a Lawrason Act municipality); these instances should not be reported.)] b) Report whether finance charges and/or late fees were assessed on the selected statements. Observation: We obtained the monthly statement September 2016 and tested it for the following: 41

45 A) The statement was reviewed and approved (the board), in writing (minutes), by someone other than the authorized card holder. B) There were no finance charges/late fees on the statement. 16. Using the monthly statements or combined statements selected under #15 above, obtain supporting documentation for all transactions for each of the 10 cards selected (i.e. each of the 10 cards should have one month of transactions subject to testing). a) For each transaction, report whether the transaction is supported by: > An original itemized receipt (i.e., identifies precisely what was purchased) > Documentation of the business/public purpose. For meal charges, there should also be documentation of the individuals participating. > Other documentation that may be required by written policy (e.g., purchase order, written authorization.) b) For each transaction, compare the transaction's detail (nature of purchase, dollar amount of purchase, supporting documentation) to the entity's written purchasing/disbursement policies and the Louisiana Public Bid Law (i.e. transaction is a large or recurring purchase requiring the solicitation of bids or quotes) and report any exceptions. c) For each transaction, compare the entity's documentation of the business/public purpose to the requirements of Article 7, Section 14 of the Louisiana Constitution, which prohibits the loan, pledge, or donation of funds, credit, property, or things of value, and report any exceptions (e.g. cash advances or non-business purchases, regardless whether they are reimbursed). If the nature of the transaction precludes or obscures a comparison to the requirements of Article 7, Section 14, the practitioner should report the transaction as an exception. Observation: We tested the September 2016 statement for the following: A) Itemized receipt, documentation of the business purpose. There were no per diem reimbursements. B) Compared each transaction with the Entity's written purchasing/disbursement policies and the Louisiana PubUc Bid Law. C) Documentation of the business/public purpose to the requirements of Article 7, Section 14 of the Louisiana Constitution. Travel and Expense Reimbursement 17. Obtain from management a listing of all travel and related expense reimbursements, by person, during the fiscal period or, alternately, obtain the general ledger and sort/filter for travel reimbursements. Obtain management's representation that the listing or general ledger is complete. Observation: Management provided the general ledger and management's representation that the general ledger is complete. 42

46 18. Obtain the entity's written policies related to travel and expense reimbursements. Compare the amounts in the policies to the per diem and mileage rates established by the U.S. General Services Administration ( and report any amounts that exceed GSA rates. Observation: We obtained the Entity's written policies relating to travel and related expense reimbursements and compared it to the per diem and mileage rates established by the U.S. General Services Administration. Exception: Reimbursements for meals exceeded the GSA rates for the location by S6.00 per day. Management's Response: Management will update its policies and procedures manual to address reimbursements for meals. 19. Using the listing or general ledger from #17 above, select the three persons who incurred the most travel costs during the fiscal period. Obtain the expense reimbursement reports or prepaid expense documentation of each selected person, including the supporting documentation, and choose the largest travel expense for each person to review in detail. For each of the three travel expenses selected: a) Compare expense documentation to written policies and report whether each expense was reimbursed or prepaid in accordance with written policy (e.g., rates established for meals, mileage, lodging). If the entity does not have written policies, compare to the GSA rates (#18 above) and report each reimbursement that exceeded those rates. Observation: We selected the (3) persons who incurred the most travel costs during the fiscal period and found they reimbursed in accordance with written policy. b) Report whether each expense is supported by: > An original itemized receipt that identifies precisely what was purchased. [Note: An expense that is reimbursed based on an established per diem amount (e.g., meals) does not require a receipt.] > Documentation of the business/public purpose (Note: For meal charges, there should also be documentation of the individuals participating). > Other documentation as may be required by written policy (e.g., authorization for travel, conference brochure, certificate of attendance) Observation: Each expense had an itemized receipt or invoice that identified what was purchased and the business/public purpose. c) Compare the entity's documentation of the business/public purpose to the requirements of Article 7, Section 14 of the Louisiana Constitution, which prohibits the loan, pledge, or donation of funds, credit, property, or things of value, and report any exceptions (e.g. hotel stays that extend beyond conference periods or payment for the travel expenses of a spouse). If the nature of the transaction precludes or obscures a comparison to the requirements of Article 7, Section 14, the practitioner should report the transaction as an exception. Observation: We compared the Entity's documentation of the business/public purpose to the requirements of Article 7, Section 14 of the Louisiana Constitution, which prohibits the loan, pledge, or donation of funds, credit, property, or things of value and found no exceptions. 43